UK interest rates have been left unchanged at 4.5% by the Bank of England.
In its latest meeting a short while ago, the Bank’s Monetary Policy Committee (MPC), which sets rates, decided against further cuts, and the Bank of England warned that economic and global trade uncertainty has “intensified”.
US trade tariffs and retaliation to the import taxes from the likes of the EU, has created uncertainty for countries, the Bank added.
Its decision to hold was widely expected, but governor Andrew Bailey said ratesetters, which voted by a majority of eight in favour of holding interest rates, with one in favour of cutting them, still believed rates were “on a gradually declining path”.
“There’s a lot of economic uncertainty at the moment,” Bailey explained. “We’ll be looking very closely at how the global and domestic economies are evolving.”
Inflation, which measures the rate consumer prices rise at, currently remains above the Bank’s 2% target at 3%.
Industry reaction:
Nick Leeming, Chairman of Jackson-Stops, commented: “Today’s decision by the Bank of England to hold rates reflects a growing sense of ambiguity about the UK’s economic outlook. A perfect storm of slashed growth forecasts, rising inflation, possible US tariffs and UK tax increases has caused the monetary policy committee to stick instead of twist with March’s decision.
“While Labour is downplaying the likelihood of policy changes in the Spring Statement, the second fiscal update from the Chancellor could either calm the seas or rock the boat. The lack of certainty of either outcome is causing the ‘wait and see’ mindset to creep in for businesses and consumers.
“Despite the wider economic picture, this has not dampened the spirits or commitment within the property market, with the latest HMRC data showing a 14% bounce in transactions, this is a market of opportunity, not fear.
“The market remains characterised by undersupply and planning delays, continuing to give sellers the upper hand. Labour entered this Parliament with a clear ambition to deliver 1.5 million new homes within the next five years, yet planning permission approvals in England are now at the lowest level in more than a decade. Whilst Labour’s Planning and Infrastructure Bill is set to tackle the red tape, many argue that it does not go far enough to deliver the homes they have promised.”
Nathan Emerson, CEO of Propertymark, said: “Today’s news will likely prove encouraging for many people who are hoping to progress on the housing ladder. It is reassuring to see the base rate held, especially considering the many national and international factors that continue to shape the global economy currently.
“With inflation currently standing at 3%, which is above the initially targeted rate by the Bank of England, it important there is very careful consideration over the forthcoming months to keeping the economy heading on the right pathway. Higher interest rates can of course affect mortgage products that are on offer, so it would always be welcome to see base rates lower when the wider economy fully allows.”
Amy Reynolds, head of sales at Richmond estate agency Antony Roberts, said: “The Bank of England’s decision will be closely watched and the minutes of the meeting scrutinised. Rates were expected to remain at 4.5% but any suggestion of an imminent cut would provide relief to buyers, particularly those relying on high-value mortgages.
“A clearer roadmap for rate reductions would help restore confidence and encourage market activity. There has been much talk of rate reductions but fluctuating inflation and other concerns are holding the rate-setters back.
“The key question is whether Reeves and the MPC will act to support growth – or introduce more hurdles for the property market to navigate.”
Jason Tebb, president of OnTheMarket, commented: “As widely expected, the Bank of England has voted to hold interest rates at 4.5%. With inflation rising to 3%, exceeding the Bank’s 2% target, caution prevailed.
While a hold in rates will be disappointing for borrowers, it does suggest a welcome level of stability which was not apparent when inflation was in double-digits and the Bank was forced to respond with consecutive rate hikes.
The trajectory for interest rates is downwards, but with global uncertainty and inflationary pressures these reductions may take longer to filter through than the markets previously thought. The base rate reductions we have seen since August have boosted activity and transactions in the market, and further cuts, when they come, will bolster confidence.”
Rightmove’s Matt Smith said: “Now that this expected interest rate hold is out of the way, all eyes are on May’s decision where the current forecast is a second cut of the year. Since the last decision in February, average mortgage rates have trickled downwards slightly but pretty much stayed flat. We’re seeing lenders try to price competitively where they can to capture business during some of the busiest months of the year for home-moving. However, there currently isn’t much wiggle room for lenders to offer cheaper rates, and hopefully a second cut can spur forward another wave of falling rates, and bring average rates closer to 4% rather than 5%.
“Some lenders may have also priced their products to manage volumes of new cases, as they try to protect their operational capacity at the start of the year to process as many completions as they can ahead of the Stamp Duty deadline. As the Stamp Duty deadline will pass soon, they could then release this capacity, and as a result we may see some lenders start to price even more competitively.”
Simon Gammon, managing partner at Knight Frank Finance, said: “In recent weeks we have seen small rate reductions to some mortgage products. However, lenders are keener than ever to lend, so in addition to rate reductions we have also seen adjustments to underwriting criteria.
“In many cases this has increased banks’ generosity to lend and widened-out the availability of certain mortgages to borrowers who now fit the revised criteria. Additionally, the Spring marks the start of a new financial year for many of the lenders, which will mean fresh lending targets. All this can lead to an increase in competition and push further reductions in pricing.
“If financial markets see an increased likelihood of future base rate cuts, this could spur lenders on to reduce rates further. As we move into a traditionally busy time for the property market, there are some things to be positive about.”
